It is common for people to purchase insurance in order to spread the risk of financial liability resulting from the occurrence of an event covered by the insurance policy. For example, it is very common for a person to carry automotive insurance coverage, such that some or all expenses associated with an accident, such as repair of the vehicle, will be borne by the insurance company. In fact, in many places such insurance coverage is mandated by law. Such insurance coverage may be offered by insurance companies because, while the benefits paid by the insurance company for some of the insureds will greatly exceed the amounts paid by these insureds for their policies, the majority of the insureds will pay more for their policies than they will receive in benefits from the insurance company. In this way, the total group of insureds is spreading the risk for liability for the entire group's repair costs.
Whenever an insured desires to receive payment from the insurance company to cover some or all of the cost of automotive repair, the insured is required to submit a claim to the insurance company. This claim is then evaluated by the insurance company, which then makes a determination as to whether the insurance company will provide a payment and, if so, how much of the total cost of the repair bill the insurance company will pay for. For example, many insurance policies include deductibles which must be met by the insured before the insurance company begins to assume financial liability for repairs. Such deductibles can be on a per incident basis, a yearly basis, etc. After the deductible has been met by the particular insured, some policies still do not pay the total remaining cost of the repair, but instead may provide payments on a cost-sharing basis with the insured. Other factors which may have a bearing upon the amount paid by the insurance company include per-occurrence maximums and maximums tied to the current “blue book” value of the vehicle, both of which will cap the total liability of the insurance company. Because of these factors, claims submitted to an insurance company must go through a process known as claim adjudication or adjustment. In the claim adjudication process, the insurance company evaluates all of the claim data submitted by the insured and makes a determination as to what benefits the insurance company is willing to pay to the insured. The results of the claim adjudication process are typically communicated to the insured by means of a printed explanation of benefits (EOB) statement.
Insurance companies process millions of claims a year; automotive insurance alone is a multi-billion dollar industry. For each claim, an insurance adjuster must first determine the estimated value of the damage to the vehicle, which is presumably substantially the cost of the repair. The insurance company then cuts a check in that amount (less any applicable deductibles, etc. . . . ) and mails it to the insured. Once the insured receives the check, it is up to the insured to decide what to do with the money. The insured may decide to repair the vehicle or they may decide it is preferable to live with the damage to the vehicle and use the money for other purposes. Once the check is cashed, the insurance company has no way of knowing how the money was spent, or even how much the repairs actually cost. Information regarding the actual repair cost (i.e., how accurate the adjuster was) would be of particular interest to the insurance company, as well as would information relating to the demographics regarding individual and regional spending patterns and repair choices.
Each check cut by the insurance company has a processing and delivery cost associated therewith. There is also a “float” period between when the check is cashed and when the money is spent. During the float period, the money resides with the insured. The cost of a typical claim is relatively high for payer organizations (i.e. insurance companies)—an average of several dollars per claim to price, adjudicate, and issue a check and an EOB. In addition, there is a loss of interest dividends during the “float” period, which is small on a per claim calculation but great in aggregate. Furthermore, there are instances where the claim amount adjudicated by the insurance company is greater than the actual cost to repair the automobile, which represents a loss to the insurance company. The result is that the costs associated with claims processing and adjustment are non-trivial for the insurance company. Even at its most efficient, claims processing today is a multi-billion dollar industry.
From the above, it is apparent that the claims adjudication process adds a significant amount of cost to the insurance provider, which is reflected as rising premiums for the consumer. Moreover, the current adjudication process provides little feedback to the insurance provider regarding how claim checks cut to the insured are spent. There is therefore a need for an insurance claim adjudication process that is much more administratively efficient than the current system and which provides some feedback information to the insurance company. A solution to this problem has thus far eluded those skilled in the art.